SAA: DA to challenge Dudu Myeni reappointment in court
5 September 2016
The Democratic Alliance (DA) today announces its decision to institute legal action on the reappointment of Dudu Myeni as Chairperson of the Board of South African Airways (SAA).
Last Friday, Cabinet announced that the controversial Dudu Myeni was reappointed as SAA Board Chairperson, alongside 11 other board members to the board of SAA.
The DA is of the strong opinion that there is a prima facie case to be made that Ms Myeni’s reappointment by Cabinet is wholly irrational given her appalling performance as SAA Board Chairperson over the past four years – overseeing the airline’s steady decline.
Her reappointment not only reeks of nepotism and cronyism so common under the Zuma administration, but it also flies in the face of the need for good governance at State-Owned Enterprises (SOEs), especially SAA, which is in financial ruins - failing to make a profit for several years - and a whisker away from being liquidated.
Our legal action thus seeks to have the reappointment of Ms Myeni set aside as being wholly irrational. We contend that Ms Myeni is an unfit and inappropriate appointment as she is incapable of steering the national carrier in the right direction.
This involves a review by the High Court as to the rationality of the decision taken by Cabinet to reappoint Ms Myeni as Board Chairperson. A rationality review is the lowest possible threshold for the validity of executive decisions and is simply concerned with whether there exists a rational connection between the decision taken.
The requirement of rationality obliges courts to engage in an evaluation of the relationship between the means employed to reach a decision on the one hand, and the purpose for which the power to make the decision was conferred, on the other. Each and every step in the process of reaching the decision must be rationally related to the outcome.
The Constitutional Court, in the seminal case of Democratic Alliance v President of South Africa, stated that:
“[A] rationality review is really concerned with the evaluation of a relationship between means and ends: the relationship, connection or link (as it is variously referred to) between the means employed to achieve a particular purpose on the one hand and the purpose or end itself. The aim of the evaluation of the relationship is not to determine whether some means will achieve the purpose better than others but only whether the means employed are rationally related to the purpose for which the power was conferred.”
We are thus of the opinion that there was no rational basis for the reappointment of Dudu Myeni as Board Chairperson based on her dreadful performance over the past four years, which simply cannot be overlooked.
We have instructed our legal team to begin with this action, and the process of serving papers will take its course during the next few days, with the application to follow in the Western Cape High Court.
During Ms Myeni’s time as SAA Board Chairperson the state-owned airline has become a financial disaster. The seriousness of the situation at SAA cannot be overstated. Under her guidance, SAA has:
- Failed to publish annual financial statements for 2014/15, with an apparent loss of R 4.7 billion;
- Failed to publish annual financial statements for 2015/16, with an apparent loss of R 4 billion;
- Run SAA at an apparent R 1.3 billion loss for the first quarter of 2016/17;
- Irrationally suspended officials, including the Head of Human Resources, apparently because they tried to curb corruption;
- Oversaw the BnP funding debacle, which cost SAA millions of rands with no returns; and
- Put SAA at risk of losing lucrative routes such as the Hong Kong route.
In addition to this, she has taken many questionable decisions, including:
- Requesting National Treasury to approve a new route to Khartoum, Sudan, on behalf of President Jacob Zuma, in order to show support to “his brother”, the controversial Sudan president Omar al-Bashir;
- Suspending Cynthia Stimpel, Head of Treasury for SAA, for removing company documents which SAA said was a breach of its own code and ethics. The documents related to the BnP debacle, and indicated that BnP’s services were three times more expensive than the nearest quote she had received from banks;
- Attempting to reinstate a direct flight route between Cape Town and Durban and Cape Town and Port Elizabeth at a huge loss of R256 million a year so that ANC MPs from KwaZulu-Natal and the Eastern Cape could “travel in style”;
- Reneging on SAA’s imminent equity partnership agreement with Emirates Airlines at the 11th hour - allegedly on the instruction of President Zuma - which would have seen more than R2 billion injected into the cash strapped entity; and
- Requesting that the chief procurement officer add the name of Mr Sizwe Zuma to a list of potential new jet fuel suppliers. SAA's jet fuel contracts are worth R10 billion per year and the airline is currently in the process of finding new empowerment partners to benefit from these lucrative contracts.
Ms Myeni has been doing President Zuma’s bidding at SAA for the past four years. It is the archetypal example of cadre deployment – appointing cronies to positions of power and influence to make Zuma-friendly decisions. This in and of itself renders Myeni unfit to oversee the national carrier.
Following the ANC’s hammering at the polls on 3 August, it’s clear that President Zuma is fast-tracking his project of state capture. With the National Prosecuting Authority (NPA) and the South African Broadcasting Corporation (SABC) already in the bag, Zuma has turned his eyes to the country’s SOEs. Myeni’s reappointment affirms this, and must be legally challenged on an urgent basis.
This unfitting reappointment is a symptom of the much bigger, more sinister picture that is unfolding at our SOE’s, which sees Jacob Zuma take control at the highest level of decision making. Cabinet has just recently appointed President Zuma to the helm of the newly established “Presidential SOE Coordinating Council”, which will oversee 13 of our country’s most strategic SOEs. The immediate reaction was telling.
Within the space of 24 hours, two private asset management firms - Futuregrowth Asset Management and Jyske Bank AS – publically stated their intention to stop extending credit to several SOE’s, citing poor governance and instability of leadership as their reasons. Other financial institutions are certainly set to follow suit unless proper action is taken by government.
It is crucial to note that even before Ms Myeni was first appointed SAA Chairperson back in November 2012, there were question marks around her fitness for the job. The DA strongly warned against a decision to appoint her due to her inability to adequately perform in her previous role as Chairperson of the Mhlathuze Water Board. The most shocking elements of her record before she first became SAA Chairperson include:
- A failed probity test, which revealed a default judgment against her in relation to R416 460 owed to Absa bank on a R3.7-million Richards Bay property;
- A R1.7 million judgement in favour of Standard Bank in respect to a property she reportedly co-owns; and
- A Special Investigating Unit (SIU) investigation into alleged maladministration, abuse of state resources, unfair dismissal of staff, noncompliance with procurement and tender processes at Mhlathuze between January 2004 and September 2008. The outcome of which never saw the light of day after, according to an SIU source, an “outbreak of shredding paper and deleting computer files” ensued, stopping the investigation in its tracks.
Despite this, Ms Myeni was appointed in a deliberate act of cadre deployment and nepotism, at the expense of the people of South Africa. It is quite clear that Dudu Myeni and Jacob Zuma are cut from the same cloth – both marred in controversy and unfit to hold the their current positions.
Of equal significance are the effects that this decision to reappoint Ms Myeni will have on our economy and on economic stability, in light of the ongoing “war” between Pravin Gordhan’s National Treasury and The Presidency of Jacob Zuma.
Under Dudu Myeni, SAA has ignored Minister Gordhan and all his warnings around the financial stability of the airline. In fact, due to her disastrous performance, Finance Minister Pravin Gordhan insisted on an entirely new SAA board in order to turn around the fortunes of the airline – with Dudu Myeni being the most necessary change.
Myeni staying on as Chairperson, amid Gordhan’s demands and strong objections, indicates that Myeni is untouchable as a Zuma-ally, and that the “war” between the Treasury and the Presidency shows no signs of ceasefire
This will no doubt have broader implications for our already ailing economy and the forthcoming ratings assessments where international agencies are looking closely at how our SOE’s are managed and run. This will make a sovereign ratings downgrade even more likely.
The situation is dire, and looks set to only degenerate in the coming months.
Going forward, we will be looking to provide an update on the legal process within the next 10 days, and once the court papers are ready, we will be setting out in detail all the legal arguments which will be made, and the remedies that will be sought.
The reality is that we are effectively flying blind with Dudu Myeni in the cockpit of SAA. Under Myeni, the airline has become a national shame, not pride.
The decision to reappoint her in the face of overwhelming evidence of her incompetence requires legal intervention. The DA will not allow Jacob Zuma to use institutions of state as tools for his own political gain, and we are confident to court will come to a suitable finding in this regard.
Issued by Mabine Seabe, Spokesperson to DA Leader, 5 September 2016